International Supply Chain Management Compiled by Rulzion Rattray

International Supply Chains Periodic Economic swings and localised protectionist policies. International supply chains frequently consist of many autonomous organisations. Informational & procedural relationships often result in dialogues that seem like arms length negotiations

Manufacturer Retailer Orders Delivery Orders Capacity Required Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

Amplification Effects Demand upswing produces shortages somewhere in the supply chain, (maybe only shortages in inventory). Reaction; local protection, orders increase, “growth psychosis effect”. If there is unreliable or slow delivery local protection can result in local decisions to increase inventory

Perceived Demand Internal vulnerability  Extend market distance  Production distributions attitudes  Poor information processing  Inventory overhang distortions Production Capacity: Real demand Apparent demand Time Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

Capacity Required: Real Apparent Production Flywheel Effect Shortages Over ordering Unreliable delivery Safety Stock Increase Demand distortion Vulnerability in the Organisation Localised Protection effect Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

5% % 20% 40% Normal level Actual level with sales drop Normal level for new sales volume Evidence of decoupled Inventory planning cycles. A 5% downturn in sales Results in a 40% downturn in Manufacturing requirement Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

Service Capacity & Inventory How can amplification effects be dealt with? Any service level can be achieved through Stock or Production capacity or a combination. Choice depends on: –Inventory holding costs –Cost of incremental capacity

Balancing the Supply Chain This requires a shift in control policy towards a systems perspective. Also requires a shift in management to one that spans the traditional boundaries of responsibility. Tackling blockages in information transfer particularly in international supply chains

Suppliers Procurement orders Manufact. orders Manufact. orders Factory orders Distribution orders Customer orders Customer orders Distribution inventory Selling point inventory In process inventory Raw material inventory 2.5 Weeks 3 Weeks Average inbound data flow 17 working days 15 working days Average outbound goods flow Time Lags in the Supply Chain Market data Assessed for Production 6 week obsolescence Priorities set with no indication of market priorities Distortions due to inventory policies Only place market demand visible Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

Conclusions International supply chains are typified by: – poor flows of information, –Local autonomy –Incompatible operating procedures Integration of Supply Chains will require: –Management of data capture & flow across functional boundaries without delay –Linked systems & shared ownership of information. Increased inventory not the only answer!

References Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York. Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman Hall, London. Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London. Stacey, R, (1996), Strategic Management & Organisational Dynamics, Pitman, London. Tayor, D. (1997),“Global Cases in Logistics and Supply Chain Management”, Thomson International Business Press, London.